Legend has it that on a Tuesday morning in September 2010, a drunk Chinese fisherman changed the course of commodities history.
His trawler, the Minjinyu 5179, was floating off the coast of the Senkaku Islands, a group of uninhabited rocks in the disputed waters between Taiwan, China and Japan. It was one of several Chinese boats playing a game of geopolitical chicken: fishing in the rich but off-limits waters around the islands, before being chased away by the Japanese coastguard.
But on this morning, as the other boats fled the coastguard, the Minjinyu held fast, ramming the patrol boats. The Japanese detained the Chinese crew and its allegedly drunk captain, kicking off a major geopolitical incident that nearly led to the breakdown of diplomatic relations over the East China Sea.
A small collection of minerals appeared to get caught up in the fray. The term rare earth minerals refers to a set of 17 metallic elements with similar chemical properties: scandium, yttrium and a group of 15 others that sit together on the periodic table. They are a vital part of many high-tech devices—used in everything from smartphones to warheads—and at the time of the fracas in the East China Sea in 2010, China controlled up to 97 per cent of the trade. Over a third of the world’s known reserves were located in the country.
After the incident with the boat, China’s exports of rare earths to Japan dropped by 40 per cent in three months. The Chinese government denied it had retaliated by restricting exports to Japan, and some commodities traders blamed the slump on the financial crisis of the previous years. But the markets panicked. “Everyone thought that supplies were disrupted—and prices went sky high,” says Frances Wall, professor of applied mineralogy at the Camborne School of Mines at the University of Exeter. The outcome, in any case, was that Japan knew it needed to find other rare earth suppliers: “We haven’t put enough effort into risk management,” as the country’s trade minister said at the time.
A few governments and companies took note and began searching for new sources of rare earths in countries not facing brewing geopolitical crises. Japan started backing miners in Australia. Denmark searched for deposits in Greenland. British mining giant Anglo American investigated whether existing copper mines could yield rare earths too. But the attention was short-lived. When prices stabilised, the sense of urgency faded—even as tensions rose between China and its neighbours over Taiwan’s independence.
It was a mistake to move on. Rare earths are now produced more widely but nearly 90 per cent of processing to transform raw materials into useable products remains in China, meaning the supply chain remains almost entirely under the country’s control.
Meanwhile, rare earths have become even more valuable. They are no longer only in demand for use in devices like smartphones but, along with a host of other metals like lithium and cobalt (markets of which China also dominates), are crucial in the fight against climate change.
It is now clear that a successful energy transition will depend on a mining boom—on the extraction, in vast quantities, not only of rare earths, but of all kinds of metals and minerals known collectively as “technology minerals”. Copper is needed for wiring an electrified world. Wind turbines require steel. Electric vehicles use lithium and cobalt. Decarbonising the global economy will see our need for raw materials undergo a profound shift. “We’re changing from a world of fossil fuels to a world of metals,” says Wall.
Renewable energy production is inherently mineral-heavy compared to fossil fuel-based systems. A typical electric vehicle requires six times the amount of minerals needed for a conventional combustion engine car. Compared with a gas-fired power plant, an onshore wind plant needs nine times more minerals per unit of power generation capacity.
To reach net zero emissions by the middle of the century, the International Energy Agency (IEA) estimates that six times more mineral inputs must be used in the energy system by 2040 compared with today. Demand for rare earths could increase three to seven times. Cobalt demand could multiply by between six and 30 times, and lithium demand by more than 40 times. The huge range in these figures, the IEA says, is a result of the precarity of national climate pledges: whether governments follow through on their promises to build more renewable energy infrastructure or not.
Western governments are beginning to draw up plans. The European Union has a critical minerals strategy that it updates every three years and, in late July, the UK government officially released its own. Among the elements it believes to be most at risk are the rare earths, cobalt, lithium, graphite and platinum. But as technology evolves, governments may have to focus on other materials. Different batteries and energy systems will turn some minerals into mainstays and leave others in the dust. That makes it difficult for governments to decide which commodities to prioritise. Kwasi Kwarteng, then secretary of state for business, energy and industrial strategy, now chancellor, seemed aware of the challenge ahead: “Critical mineral supply chains are complex and opaque, the market is volatile and distorted, and China is the dominant player,” he said.
The UK has high-profile plans to develop lithium mining in Cornwall, as well as zinc and copper exploration in southwest Scotland and Northern Ireland. But the west won’t be able to solve the commodity supply problem with domestic mines alone.
Critical minerals are less geographically widespread than fossil fuels: three-quarters of rare earths come from just three countries. The same is true of lithium and cobalt, the latter being mainly produced in the Democratic Republic of the Congo, followed by Russia and Australia. By contrast, almost three-quarters of global crude oil is produced in 10 countries. Rare earths are relatively abundant—despite their name—but much more complex to extract than fossil fuels.
Sarah Gordon, a geologist who worked for Anglo American after the 2010 rare earth supply panic and is now CEO of risk management consultancy Satarla, says that locating reserves isn’t too hard, geologically speaking, but getting them out of the ground is geopolitically risky. “You’re going head-to-head with China, and a single company can’t do that,” she told me. It’s also expensive—in countries where environmental regulations or wage requirements would push up prices, rare earth mines are often uneconomical.
Finally, there’s the reality that almost all the infrastructure to refine these minerals is in China. The country still controls 50-70 per cent of cobalt and lithium processing, and nearly 90 per cent for rare earths.
The imbalance we see today was deliberate. Years before the Senkaku collision, China prepared a minerals strategy: “They said, ‘Saudi Arabia has oil, China has rare earths’,” says Wall. “They set out on that strategy to dominate, they’ve done it very successfully, and they have all the expertise right along the value chain. They’ll happily supply all the magnets for all the wind turbines, thank you very much.”
Western countries, by contrast, were happy to keep mines and heavy industry far away. It was convenient to outsource the less profitable and more environmentally intensive parts of the value chain to China, rather than try to build them at home, where “dirty” mines face public opposition and are held to dramatically higher standards of environmental and community impact. “Now that’s coming back to bite us,” says Karen Hanghøj, director of the British Geological Survey.
The Russian invasion of Ukraine in February made the situation worse. The west relies on Russia as a major exporter not only of gas but also of metals like nickel. The war has contributed to an increase in the price of both. In September 2022, Europe paid around the same price for just a quarter of the Russian gas it bought a year earlier. Mining and processing of metals—energy-intensive businesses—will become yet more expensive if the cost of gas continues to rise.
Meanwhile, the risk that war pushes more commodities out of reach has increased. Tensions around the waters where the Minjinyu 5179 rammed a Japanese coastguard vessel a decade ago are heightened. Relations between Russia and China appear unsteady—but experts warn that if there were a Sino-Russian alliance, it may embolden Beijing to invade Taiwan, challenging Europe and the United States to respond. The west’s attempts to sanction Russia over Ukraine have shown how difficult it would be to impose similar economic measures on China, and how costly it would be to lose the supply of critical commodities controlled by Beijing. “If China ever has to be sanctioned, we need to be ready for it,” says Philippe Le Billon, a professor at the University of British Columbia and expert on natural resources and armed conflicts. “That would require essentially a major step in securing our mineral supplies.”
Recycling could be part of the solution. The Royal Society of Chemistry’s “Precious Elements” campaign is pushing for an international effort to limit electronic waste by “mining” devices like smartphones for reusable components before making fresh incursions into the earth. This is undoubtedly a good approach, but it is insufficient. “We cannot recycle our way out of this one,” says Hanghøj.
Western economies have no choice but to mine metals and minerals. Unfortunately, the industrial boom required will bring its own problems for people and the planet.
First, the mining industry has already exploited the richest and most accessible reserves of some metals, particularly copper. Now miners must work harder to find sources that enable them to keep up with demand.
Second, mining and mineral processing are themselves energy intensive. Although the total lifetime emissions footprint of an electric vehicle is around half that of a combustion car, the process of extracting the materials out of the ground to make one is undeniably polluting. Heavy industry is one of the most carbon-intensive sectors, and also one of the hardest to decarbonise.
Third, mining has a bad reputation for corruption, and poor social and environmental ethics. Earlier this year, an internal investigation at Anglo-Australian mining giant Rio Tinto revealed extremely high levels of bullying, racism and sexual harassment; in 2020 the company faced a federal inquiry for blowing up the Juukan Gorge, a 46,000-year-old site with sacred significance for Australian Aborigines. (The company’s chief executive released a statement on its website apologising for the “distress” caused.) In June, the state auditor in the DR Congo said that $400m pledged to the government by the state mining company, Gécamines, had gone missing.
There are countless other stories like these across the sector. If mining expands—as it must—these scandals are set to multiply. Today the mines needed to supply the energy transition are often in countries where environmental standards and human rights are overlooked. It costs companies to comply with standards on pollution, wages and worker protections, and some choose not to, so that minerals and metals remain cheap. But this failure has tainted the supply chain. “Can any mobile phone, any car manufacturer, any wind turbine manufacturer put their hands on their heart and say, ‘nobody and no part of the planet was harmed in the production of this?’,” asks Gordon. “At the moment, they can’t.”
There is no single solution to the coming energy supply crisis. The green transition will rely on the west developing new supply chains for processing minerals, as well as establishing trade agreements that don’t exploit the countries where that processing already takes place. It also requires a fundamental reassessment of how we design and reuse everything, from our smartphones to the blades of wind turbines.
It is possible to get it right. In the years after the Senkaku collision, the world’s geologists enacted strategies that began to reduce reliance on China’s rare earths. The Japanese government’s strategy to financially back rare earth mines in countries including Australia, with the goal of broadening supply, was one that proved effective. According to the IEA, by 2019 the Chinese share of rare earth production had declined, from 97 per cent to 60 per cent of total global supply. The takeaway is clear: creating a reliable supply of critical minerals requires direct government support.
The time to enact such plans is running out. Emissions must fall 45 per cent from 2010 levels by the end of this decade if the planet is to meet the mid-century net zero goals. That means the mining industry, used to long-term thinking, needs to move fast. If it succeeds, there will be huge benefits. Once the turbines and hydrogen plants have been built, the new global energy system will be far less dependent on hostile states. Consumers who now see their energy bills spike will be protected from the worst price fluctuations of the fossil-fuel age.
If the west is to pull off this immense feat, governments in Europe and the Americas must play catch-up in a game China created, and map out what their own mineral futures will look like.
